By Huw Jones
LONDON (Reuters) - Insurers and reinsurers in the European Union should temporarily suspend dividends and share buybacks, and consider postponing bonuses as well to ensure continuity in services during the coronavirus pandemic, the bloc's insurance regulator said on Thursday.
The virus has led to lockdowns of economies and a rising number of insurance claims as travel and events are canceled, and business disrupted.
The European Insurance and Occupational Pensions Authority (EIOPA) said it was essential to ensure insurers and reinsurers hold a "robust level" of reserves to protect policyholders and absorb potential losses.
"This objective requires that (re)insurers take all necessary steps to continue to ensure a robust level of own funds to be able to protect policyholders and absorb potential losses," EIOPA said in a statement.
"This prudent approach should also be applicable to the variable remuneration policies," EIOPA said.
Insurers should review their current remuneration policies, practices and rewards and ensure they reflect "prudent capital planning" and the current economic situation.
"In such context, the variable part of remuneration policies should be set at a conservative level and should be considered for postponement," EIOPA added.
Insurers that consider themselves legally required to pay out dividends or large amounts of variable remuneration should explain the underlying reasons to their national regulator, it said.
The suspensions should be reviewed as the financial and economic impact of the COVID-19 epidemic starts to become clearer, the watchdog added.
The statement is similar to a letter from Bank of England Deputy Governor Sam Woods on Tuesday to insurer CEOs in Britain, asking them to pay close attention to the need to protect policyholders and remain sound before taking decisions on dividends or bonuses.